SINGAPORE, Feb 19: Malaysian palm oil futures edged higher on Tuesday, tracking gains in soybeans after disappointing rains in Argentina raised the prospect of a tighter crop.
U.S. Soybeans rose to a one-week high, resuming trading after the President’s Day holiday, as the rain that had been expected to bring relief to wilting Argentine soybean crops over the weekend was lighter than expected.
A smaller soybean crop for crushing into soybean oil may shift more demand to competing palm oil that trades at a steep discount of almost $300 per tonne.
‘There was news of much lesser rain received than expected in Argentina this week, and Chinese players are also positive after coming back from the Lunar New Year break,’ said a Singapore-based trader with a regional commodities house.
By the midday break, the benchmark May contract on the Bursa Malaysia Derivatives Exchange had inched up 0.6 percent to 2,551 ringgit ($824) per tonne. Prices traded in a range of 2,550 to 2,568 ringgit.
Total traded volumes stood at 10,121 lots of 25 tonnes each, slightly lower than the typical 12,500 tonnes.
Technicals showed Malaysian palm oil is expected to rise to 2,593 ringgit per tonne, as indicated by a rising wedge, said Reuters market analyst Wang Tao.
Traders are awaiting the Malaysian Feb. 1-20 palm export data due on Wednesday, after rising shipments in the first half of the month raised hopes for stocks to ease further.
Malaysia’s January palm oil stocks inched down 1.9 percent from a month ago to 2.58 million tonnes, the first drop since June last year.
Industry players are also expecting stronger export demand for crude palm oil this month as exporters take advantage of February’s zero percent tax before it rises to 4.5 percent in March.
Brent crude held steady above $117 per barrel on Tuesday after settling down for the third straight session the previous day, with traders looking ahead to Italy’s upcoming elections.
Other competing vegetable oil markets also gained on Argentine soy crop worries. The most active U.S. Soyoil for May delivery and the most active September soybean oil contract on the Dalian Commodity Exchange both edged up 0.7 percent.
(AGENCIES)
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